Unpacking the Dividend Potential of Fortescue Ltd (FSUGY, Financial)
Fortescue Ltd (FSUGY) recently announced a dividend of $1.42 per share, payable on 2024-04-03, with the ex-dividend date set for 2024-03-01. As investors look forward to this upcoming payment, the spotlight also shines on the company's dividend history, yield, and growth rates. Using the data from GuruFocus, let's look into Fortescue Ltd's dividend performance and assess its sustainability.
What Does Fortescue Ltd Do?
Fortescue is an Australia-based iron ore miner. It has grown from obscurity start of 2008 to become the world's fourth-largest producer. Growth was fueled by debt, now repaid. Expansion from 55 million metric tons in fiscal 2012 to about 190 million metric tons in 2023 means Fortescue supplies nearly 10% of global seaborne iron ore. Further expansion above 200 million metric tons is likely once it completes construction of its 22 million metric tons Iron Bridge magnetite mine. However, with longer-term demand likely to decline as China's economy matures, we expect Fortescue's future margins to be below historical averages. More recently, Fortescue diversified into green energy, with ambitions to become a major supplier of green hydrogen and green ammonia. Its efforts are early stage.
A Glimpse at Fortescue Ltd's Dividend History
Fortescue Ltd (FSUGY, Financial) has maintained a consistent dividend payment record since 2011. Dividends are currently distributed on a bi-annually basis. Below is a chart showing annual Dividends Per Share for tracking historical trends.
Breaking Down Fortescue Ltd's Dividend Yield and Growth
As of today, Fortescue Ltd currently has a 12-month trailing dividend yield of 6.45% and a 12-month forward dividend yield of 7.60%. This suggests an expectation of increased dividend payments over the next 12 months. Over the past three years, Fortescue Ltd's annual dividend growth rate was 28.00%. Extended to a five-year horizon, this rate increased to 58.10% per year. And over the past decade, Fortescue Ltd's annual dividends per share growth rate stands at an impressive 49.80%.
Based on Fortescue Ltd's dividend yield and five-year growth rate, the 5-year yield on cost of Fortescue Ltd stock as of today is approximately 63.71%.
The Sustainability Question: Payout Ratio and Profitability
To assess the sustainability of the dividend, one needs to evaluate the company's payout ratio. The dividend payout ratio provides insights into the portion of earnings the company distributes as dividends. A lower ratio suggests that the company retains a significant part of its earnings, thereby ensuring the availability of funds for future growth and unexpected downturns. As of 2023-12-31, Fortescue Ltd's dividend payout ratio is 0.61.
Fortescue Ltd's profitability rank, offers an understanding of the company's earnings prowess relative to its peers. GuruFocus ranks Fortescue Ltd's profitability 9 out of 10 as of 2023-12-31, suggesting good profitability prospects. The company has reported positive net income for each of year over the past decade, further solidifying its high profitability.
Growth Metrics: The Future Outlook
To ensure the sustainability of dividends, a company must have robust growth metrics. Fortescue Ltd's growth rank of 9 out of 10 suggests that the company's growth trajectory is good relative to its competitors. Fortescue Ltd's revenue has increased by approximately 10.60% per year on average, a rate that underperforms than approximately 50.77% of global competitors. The company's 3-year EPS growth rate showcases its capability to grow its earnings, a critical component for sustaining dividends in the long run. During the past three years, Fortescue Ltd's earnings increased by approximately 6.30% per year on average, a rate that underperforms than approximately 54.98% of global competitors. Lastly, the company's 5-year EBITDA growth rate of 42.80%, which underperforms than approximately 8.24% of global competitors.
Next Steps
In conclusion, Fortescue Ltd (FSUGY, Financial) presents a compelling case for investors seeking dividend income, with its consistent history of payouts and impressive growth rates. The company's dividends are supported by a moderate payout ratio and robust profitability, which may reassure investors of the sustainability of future dividends. However, while growth metrics indicate a solid trajectory, they also suggest there may be challenges ahead, as some growth rates underperform relative to global competitors. Investors should consider these factors, along with broader industry trends and Fortescue's strategic initiatives in green energy, when evaluating the long-term prospects of their investment. GuruFocus Premium users can screen for high-dividend yield stocks using the High Dividend Yield Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
